No Deal Today, No Talks Tomorrow; Terror Training Fraud?; Casey Anthony, Out in Three Days; Brooklyn Boy Murdered; Young Entrepreneurs

Aired July 14, 2011 - 23:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(COMMERCIAL BREAK)

ANDERSON COOPER, CNN ANCHOR: Good evening, everyone.

We begin tonight with breaking news, late new details from inside today's debt crisis meeting. Headline one: no agreement today. Headline two: no meeting tomorrow; after five straight days it's the end of the line for now. And headline three: the warning bells keep getting louder from the heart of capitalism to the capital of communism.

Standard & Poor's today signaling it may downgrade U.S. debt even if a default is averted. And the People's Republic of China, Red China, urging Washington to raise the debt ceiling. Somewhere, Chairman Mao is smiling, even if no one else is.

On that note today, President Obama went on record with his account of how last night's turbulent meeting ended. You will recall House Majority Leader Eric Cantor says the President sharply warned him not to call his bluff, said -- quote -- "I'll see you tomorrow" and walked out of the Cabinet Room.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: No. Look, at the end of the meeting, after we'd already met for a couple of hours, what I said to the group was what I think the American people feel, which is we have a responsibility to do the right thing. We shouldn't be overly partisan, we shouldn't be posturing; we should solve problems.

(END VIDEO CLIP)

COOPER: Well, whichever account rings true to you, today's meeting was the first to deal largely with revenue. We got late insight in a moment from Jessica Yellin and Gloria Borger, who have been working their sources right up to airtime.

But "Keeping Them Honest" tonight, there's new polling you should know about that may surprise you, showing what Americans really think about raising taxes to close the budget gap.

Now, here's what Republicans have been saying for a long time that Americans think. (BEGIN VIDEO CLIP)

REP. ERIC CANTOR (R-VA), HOUSE MAJORITY LEADER: Right now this economy is ailing. And we don't believe, nor do I think the American people believe, that raising taxes is the answer.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: The American people understand that tax hikes destroy jobs.

REP. TOM PRICE (R), GEORGIA: I think what the American people appreciate is that you don't reinvigorate the economy by raising taxes.

SEN. JON KYL (R-AZ), MINORITY WHIP: Eighty percent of the American people do not want to see taxes raised.

COOPER: Now, you can agree or disagree with the premise that taxes ought to be lower and government smaller. That's not what we're talking about.

"Keeping Them Honest," when Republicans say they are pushing for a budget deal containing no tax increases because that's what most Americans want, according to every poll we have found, that is simply not true.

New polling out today from Quinnipiac asked voters if they support a budget deal with budget cuts only or a mix of cuts and taxes on corporations and the wealthy.

Just 25 percent said cuts only -- 67 percent favored a mix. If you break it down further, 48 percent of Republicans, not even a majority, favor the cuts-only approach. And in a recent Gallup poll, look at the first line, only 26 percent of Republicans favored lowering the debt with budget cuts alone. And just 20 percent of all voters did.

In fact, all of the recent polling we have seen shows Americans want a mix of spending cuts and tax increases. That goes for polling from Gallup, Quinnipiac, ABC News, "Washington Post," Bloomberg, IPSOS, Reuters, and USC/"L.A. Times."

More now on the negotiating today and why it won't happen tomorrow. In a moment, we'll talk to James Carville and Carly Fiorina.

But first chief White House correspondent Jessica Yellin has late details. So does chief political analyst Gloria Borger. So, Jessica, the President still says he wants the biggest deal possible, but here we are two weeks away from the deadline, still no deal. Where do things stand right now?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Anderson, after five days of negotiations and almost eight hours of discussions, practically speaking, they are no further along than they were when this thing started last Sunday.

As you say, the President has said he wants this big deal, but this thing broke up today. The meeting ended with the President telling these leaders to go back to their members and ask them what do they think can pass and then report back to the President with something that they believe can pass by this Saturday morning.

They're not even having a meeting tomorrow. Now, despite all that, I am told by my sources that there's not a lot of optimism that this particular negotiating process here at the White House is going to actually end up leading to the real deal.

And a lot of effort and attention is now turning to a different process that's happening in the U.S. Senate and another alternate deal that's being worked out between the two Senate leaders that could instead end up raising the debt ceiling. A lot of hope is centered there -- Anderson.

COOPER: And basically what is that deal, what is that negotiation based on? That's Harry Reid and Mitch McConnell?

YELLIN: It's a Harry Reid-Mitch McConnell deal. It's a little complicated, but it would effectively raise the debt ceiling in a negative vote which would allow for spending cuts that can be spelled out by the President but don't necessarily have to pass.

There would also be a deficit commission that would allow for other spending cuts and also potential revenue elements and entitlement reforms. And it would allow people to vote against raising the debt ceiling, instead of in favor of raising the debt ceiling, so that members could then go to their voters and say, I voted no, instead of, I voted yes.

COOPER: So, Gloria, why is there this separate track now? I mean, what's been point of these White House meetings?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well -- well, you know, it's interesting, because I spoke with one Republican leadership aide just to echo what Jess said and he said, look, it may be that the White House talks are becoming increasingly irrelevant here. Because if you're a member of Congress and you get to have it both ways and you get to vote no on raising the debt ceiling, but then the debt ceiling passes, why not do that, if they can come up with that kind of a deal?

The only problem with that is, and the big question is, I think, do you attach a significant amount of spending cuts to it? Like $1.5 trillion either now or sometime in the future? Or do you promise to set up a commission that gets a vote on a date certain in Congress to do spending reductions and perhaps even tax reform? But it seems like that track as Jess said is moving along a lot faster.

COOPER: And, Jessica, a lot of people seem to have written off this -- the McConnell idea a couple of days ago, but now it seems like even some House Republicans are maybe going to get behind it.

YELLIN: Well, yes, because there is so much -- there is so much uncertainty about the process that's happening here. But I don't want to get ahead of it because the House Republicans are still very wary. It's not at all clear if it could get the votes there.

The one thing I would say, Anderson, is that everybody you talk to in town, Democrat, Republican, says, I have no idea how this is going to get worked out. I have no idea. But what they do say is, it's going to happen in the end because as this approaches, people are going to be so terrified of voting no that these members who are saying no now are going to start to realize -- this is what they're convinced of -- start to realize that the stakes are just too high and that this will come together in a sort of midnight-hour vote.

BORGER: Well --

COOPER: Jessica Yellin and Gloria, we'll see. I appreciate it.

I want to talk more about the political dividing lines, as well as areas of potential agreement and fallback plans.

Carly Fiorina is the vice chairperson of the National Republican Senatorial Campaign Committee. She's a former Senate candidate herself and a former CEO of Hewlett-Packard. Also, political contributor and Democratic strategist James Carville.

So, James, we're told the President wants to see some kind of an agreement within 36 hours. What do you make of all this? I mean, where -- how do you see this?

JAMES CARVILLE, CNN POLITICAL ANALYST: This is a great civics lesson because we have the President and the congressional leadership and they go to the White House and they sit around a table and everybody is there.

And in reality what's going on is Senator Reid and Senator McConnell are kind of meeting in some closet off somewhere deep in the bowels of the Capitol, scratching something on the back of a napkin. And it looks like it's going to be the kind of deal that's going to happen. I mean it's just one of these fascinating things of the way Washington works.

And this thing will probably happen and as Jessica was saying it's going to happen late because of the terror of what would happen if it doesn't. Now, you go back and you remember TARP, remember they voted that down and then they had to go back after the stock market fell 770 points and everybody is trying to game the system where they can vote no and it passes.

But you need, what, like 218 House members to vote yes. Somebody's -- somebody's got to bite the bullet here before it's over.

COOPER: Carly, Michele Bachmann and some other Republican members of Congress are saying that things will be tough, but fine if there's no deal by the deadline, that the dire warnings from the President and others are just scare tactics. As a former businesswoman, what do you think?

CARLY FIORINA, VICE CHAIR, REPUBLICAN NATIONAL COMMITTEE: Well, I disagree with that. I think we must raise the debt ceiling. And I think what's disappointing to so many Americans is that a deal that could have been passed, that would have been passed has been on the table for at least six months. And that deal started with Obama's deficit commission reporting out.

The deal involves lowering the corporate tax rate and closing the corporate tax loopholes. It involves reforming entitlements in a simple way, in a simple way, to index Medicare and to change the inflation indexes on Social Security. And it involves some spending cuts.

That deal has been on the table for a long time. And unfortunately, I think James said it well. Everybody has been gaming the system, including the President, I would add. And that deal hasn't been done.

COOPER: James, why hasn't that deal been done?

CARVILLE: Well, first of all, one of the interesting things that we're reporting, and Gloria and Jessica on top of this, is they're going to have this commission that's going to come in and have an up- and-down vote. If you will remember, that was something that was proposed by the previous -- during the previous administration by Senate Republicans. President Obama picked that up and said let's have a commission and have an up-or-down vote. Seven Republican senators changed their mind.

Now we're going to go back to that. We could have had that in February of 2009, if they would have gone along with it. The President did propose that. And that's exactly what Senator Reid and Senator McConnell are talking about doing right now. Well, sometimes, it takes awhile to get there, but maybe this is going to be a good idea. I don't know.

FIORINA: Well, unfortunately, though, the truth is that President Obama hasn't proposed anything very specific, except a budget in February of this year, which was voted against 97-0.

CARVILLE: But Carly, he proposed to have a deficit commission that was on a fast track. It was the base closing commission.

(CROSSTALK)

FIORINA: That's right.

CARVILLE: And you could vote it up or down. Seven Republicans who were previously for it changed their mind because he proposed it. That would -- that would have gotten you a clean vote on a lot of things.

(CROSSTALK)

FIORINA: Yes, well, the President is the leader of the free world and he owes the Congress a budget and he put one out there that didn't have a single one of the budget deficit commission's recommendations. So he hasn't made -- he hasn't put forward a specific plan.

But Anderson, to your original question, we have got to come up with an answer here.

(CROSSTALK)

COOPER: But doesn't everybody know, go ahead -- doesn't everybody know, though, that some kind of a compromise has to be made, I mean, that that both sides kind of -- ultimately, to get something done, to get cuts, to deal with a deficit, something -- compromise has to be made? I mean is that not true?

CARVILLE: There's a large part of the sort of right-wing media if you listen to like talk radio, you listen to talk radio, you read "The Wall Street Journal," that says to heck with it. Just do it. It's not going to be that big of a deal. You listen to Michele Bachmann, you listen to a ton of these House Republicans, just shut the thing down. That's the only way you will be able to get to do this thing that it's sinful to vote for this.

(CROSSTALK)

CARVILLE: And by the way, a majority of the country, a majority of the country says that they're not in favor of increasing the debt limit. That's just a fact.

FIORINA: And you also have people like Nancy Pelosi saying that entitlement reform is absolutely off the table, even after the President of her own party put it on the table.

So there are people in both parties who are playing games with this. I just think it's a shame that a deal that would have both raised revenue, not tax rates, and it reformed entitlements and cut spending has been on the table in Washington, D.C., for six months, and it hasn't gotten done.

CARVILLE: Well, I don't know of a single Democrat that said that it is no big deal if we don't -- if we don't raise the debt ceiling.

CARVILLE: Again, I don't know of a single Democrat that said it's not a big deal if you don't extend the debt limit. FIORINA: But there are lots of Democrats who have said entitlement reform is off the table, which is in essence the same thing.

CARVILLE: Ok. All right.

COOPER: We'll leave it there. James Carville, Carly Fiorina, I appreciate you joining us. Thank you very much.

Let us know what you think. We're on Facebook. Follow me on Twitter @AndersonCooper. I will be tweeting in this next hour, so get on Facebook. We will talk.

Up next, the man who claims to be an expert on terrorism -- this is a fascinating story. We did part one last night. This is part two of it. Claims to be an expert on terrorism because he says he used to be a terrorist himself. The problem is, CNN has found no evidence to back up his claims. And tonight we have tough questions for him about how he runs his business, a business that's not only tax-exempt, but taxpayer supported. It's getting taxpayer dollars. We're "Keeping Them Honest."

Also tonight, this just breaks your heart, video of an 8-year-old boy here in New York City just moments before being abducted and later murdered, dismembered by his killer. There was an arrest and now police say there's a confession. You're going to hear part of that confession tonight. It is chilling.

The details provide a horrifying window into an apparently very, very sick mind. We will talk about that and the legal implications with Sunny Hostin and Dr. Drew Pinsky.

(COMMERCIAL BREAK)

COOPER: "Keeping Them Honest" tonight, we are continuing our reporting on a man named Walid Shoebat. He lectures law enforcement groups around the country, claiming to be an expert on Islamic fundamentalism and terrorism. He says he himself was once a terrorist and he sells his consulting services, sometimes at taxpayer expense.

Last night on this program, we revealed that after much investigation, CNN could find no evidence to back his claims that he was once a terrorist who had been arrested in Israel.

And he's not the only so-called expert whose background may not be as advertised. Recent reporting finds a number of so-called experts teaching and in some cases preaching about terrorism may not really know what they're talking about. The Department of Homeland Security has handed out at least $40 million in training grants over the past five years, and at least some of that money spent on speakers like Walid Shoebat.

Recently, Senators Susan Collins and Joe Lieberman asked the Department of Homeland Security and the Justice Department to account for how federal training dollars are spent for what they called inflammatory rhetoric. Tonight we look at how Walid Shoebat makes his money and what he does with it.

GRIFFIN: He became even more defensive when we began asking about his foundations, his tax-exempt status and all the money he is making. He has turned what some might call hate speech into a career, trading on his past to advice law enforcement officials and religious groups about the threat of Islamic radicals.

He says he was a Palestinian terrorist, jailed by the Israelis. But it's a life story based on very little evidence. But it sure pays well. Tax records filed by his business partner reveal his speaking engagements earned more than $560,000 in 2009.

SHOEBAT: So why the skepticism if somebody collects half a million dollars? You think it goes to my pocket? It's absolutely untrue.

GRIFFIN: Like his answers, his tax return is vague on specifics. And his various businesses and foundations -- well, that's vague, too.

(on camera): How much do you get paid for these speaking engagements?

SHOEBAT: Not that -- not that much. If you look at my salary, I make like what probably what a gas station makes, what a garage makes. I mean everybody thinks I'm just raking in the dough, which is absolutely not.

GRIFFIN: Yes. The Walid Shoebat Foundation, is that a charity?

SHOEBAT: Walid Shoebat Foundation is part of the FFMU.

GRIFFIN: And what does FFMU do?

SHOEBAT: Basically, we're in information. And we do speaking and we do also helping Christians that are being persecuted in countries like Pakistan. And we help Christians who are suffering all throughout the Middle East.

GRIFFIN: And how do you do that?

SHOEBAT: None of your business.

GRIFFIN: Isn't it anyone's business who donates to you?

SHOEBAT: Of course. But, you see, a lot of the times, if you disclose information who you're helping, it ends up biting them.

GRIFFIN (voice-over): The business in fact Shoebat leaves up to his manager, Keith Davies, who was down the hall selling Shoebat's anti-Islam books. When CNN had specific questions about the business, like perhaps the names of the high-ranking generals and experts he said are on his board of advisers, well, Shoebat said, get the names from Davies.

(on camera): Walid said that you would be able to tell us about your advisory board. You guys said you have generals and other high- ranking officials?

KEITH DAVIES, SHOEBAT'S MANAGER: Correct, yes.

GRIFFIN: Can you tell us who they are?

DAVIES: Off the top of my head, yes. Let me see. I'm trying to think. The names have gone blank. They will come back to me in a second.

A Major General -- no, I can't remember it, a four-star -- there's a three-star general of the Air Force, Irish name, Thomas -- I usually know these off by heart.

GRIFFIN (voice-over): Davies did come up with one name, a pilot, but no contact details, despite repeated requests from CNN. We made calls to the individual anyway, but he never called us back.

The group's public tax forms lists only Davies and a real estate developer as board members, both with the same address. Shoebat and Davies run several foundations and three Web sites that are all linked, a confusing model, considering the group's tax returns for the past four years contain very little information.

In fact, while Shoebat has a foundation bearing his name, no tax forms could be found on public sites. Davies said they are merged together.

(on camera): The other question Walid said I should ask you is about the money.

GRIFFIN: Well, you have all these foundations. And I'm trying to find out where this money goes in terms of charity, what is the foundation.

DAVIES: Well, most of the money is used to help persecuted Christians in the Middle East that the media doesn't want to talk about.

GRIFFIN: I will talk about it if you can give me any information about that.

DAVIES: Yes, we have a Web site that you can have all the information about what we do on our Web site. It's RescueChristians.org.

GRIFFIN: I read that. It's very unspecific as to what exactly is going on, where the money is going.

Keith, I've got to ask you, because I do a lot of this type of reporting on charities, organizations that collect money for various funds. Everything is not very transparent. Is this -- are you running a scam here?

DAVIES: Oh, absolutely, a big scam. I'm not answering. You're trying to -- just trying to scam us all the time. We are a very legitimate organization. We have been around for eight years or we -- six or seven years. (INAUDIBLE) files with the IRS and you can have a look at the forms. I can even send you a copy of the tax returns if you want.

GRIFFIN (voice-over): He never did, but we found some on other Web sites. The money is coming from universities and churches and from your tax dollars. Some of his appearances are paid out of Homeland Security grants. The DHS in South Dakota told us Shoebat was paid $5,000 plus expenses, to speak at this event. And he was given security.

But Shoebat told us:

SHOEBAT: No, there's no expenses they paid. The hotel, I paid myself. The hotel, I paid today myself.

GRIFFIN (on camera): The bigger question may be why Walid Shoebat is in South Dakota teaching a bunch of cops about Islamic terrorists, a state that has so few Muslims. The local newspaper here in Rapid City says only a couple of dozen live here year-round.

JIM CARPENTER, SOUTH DAKOTA HOMELAND SECURITY DIRECTOR: I think he brings a point of view that certainly is not necessarily mainstream; it's not a South Dakota-based point of view. He brings in commentary about living and being raised as a Muslim and then converting over to Christianity.

(END VIDEOTAPE)

COOPER: So why would someone's religious conversion be important to a homeland security conference in Rapid City, South Dakota?

GRIFFIN: You know, I really couldn't figure that out. And based on further questions, I really didn't get a good answer from Jim Carpenter with the South Dakota Department of Homeland Security.

The federal Department of Homeland Security, Anderson, we went to, trying to find out if they do any vetting of speakers, if they had any idea about Shoebat, if anyone in the federal government did what we have done, try to check out all his claims.

Well, what we got from Homeland Security was a statement that said, if states use DHS grants for speakers, it's up to the states to vet them. We also got this. "If training programs do not meet these standards -- DHS standards -- corrective action will be taken. We have not and will not tolerate training programs," says the DHS, "or any DHS-supported program that rely on racial or ethnic profiling."

Anderson, based on the three sessions we sat in with Walid Shoebat and our interview with him, we can tell you he does advocate profiling and flatly being suspicious of anybody who's Muslim.

COOPER: And his reaction to you kind of turned ugly.

GRIFFIN: Yes, it sure did, not just him, too. South Dakota's homeland security people, they actually tried to keep us out of the conference. We got in only after they had to call the governor's office.

As for Shoebat, he did get testy. Later sessions after that interview, he began attacking the media, specifically CNN, for doubting his story. He has since accused us and you, Anderson, of being used by the Council on American-Islamic Relations, even suggesting that group was the primary source for our report, which, of course, is not true.

COOPER: And it's interesting. I mean, if somebody's running a legitimate foundation that's tax-exempt and stuff, I mean usually they're very willing to be transparent and willing to give documents and stuff. It sounds like those guys were saying, oh, yes, we will send you these documents, and then nothing shows up.

GRIFFIN: No. And it's all wrapped in this secrecy and security. They're under the impression we're asking for the names of some Christian trainees in the Middle East that are being persecuted.

(CROSSTALK)

COOPER: Right, which you're not.

GRIFFIN: We're not. We're just trying to figure out where is the money going, because we cannot find out where this money is going.

COOPER: Well, it's also interesting in your piece because Shoebat said, oh, well this foundation is part of this other thing and it pays for speaking and teaching, which basically is what he does, oh, and also helping Christians. The other guy said it mainly goes to helping Christians, and yet again no details.

GRIFFIN: And I think you could see from the reporting, we couldn't get a straight answer about anything from just about anybody. That reporting continued in our various e-mails and contacts with these fellows after that.

It was just a very confusing -- and in the past when we have done reporting like this, the more confusing, the less transparent things are, the more questions need to be asked, I think, by DHS and other federal authorities.

COOPER: Yes. Interesting that they haven't been.

Drew, I appreciate the reporting. Great job, as always. Thanks.

Coming up, a horrifying story in Brooklyn, an 8-year-old boy murdered. This is surveillance video of him walking in his neighborhood on Monday evening. His body was found about 36 hours later. And now a 35-year-old man is charged in the murder. Police say there is a confession. You'll hear parts of it tonight.

Also ahead, Casey Anthony will walk out of an Orlando jail just three days from now, brand-new details about her release. We'll get a live update from Gary Tuchman in Orlando.

(COMMERCIAL BREAK)

COOPER: "Crime & Punishment" tonight: Casey Anthony will be a free woman in just three days. Tonight, we have brand-new details about the logistics of her release, given the high-profile nature of the case and the strong public reaction to her acquittal.

Gary Tuchman reports.

(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN NATIONAL CORRESPONDENT (voice-over): Prisoners are released every day from the Orange County Florida Jail, but perhaps none of them with the level of notoriety that will greet Casey Anthony when she leaves Sunday after her stunning acquittals.

Her attorney, Jose Baez, talked to ABC News about how her notoriety could bring danger.

BARBARA WALTERS, ABC ANCHOR: Are you worried about her safety? There's such antagonism towards her.

JOSE BAEZ, ATTORNEY FOR CASEY ANTHONY: I am. I am. And I'm afraid for her.

WALTERS: Will she have bodyguards?

BAEZ: You know, we're in the process of trying to take that next step for her and assist her in that -- in that regard. So I don't know.

TUCHMAN (on camera): So now there is an intense security plan in place. Casey Anthony will be released from this jail on Sunday, as early as 12:01 a.m. We don't know how she'll be taken out. We don't know where she'll go. But the sheriff's office is allowing two news photographers to videotape and take still photos of her leaving. Once she's safely gone, we'll be allowed to televise the images of her going free.

SUNNY HOSTIN, CONTRIBUTOR, "IN SESSION": I don't think they can treat her like any other inmate in terms of the release. It would be irresponsible given the frenzy surrounding Casey Anthony because again, while she is in their custody prior to release, they have to protect her. So that release is still part of their purview.

TUCHMAN: But where will Casey Anthony go, and will she change her appearance? After all, this is a woman whose face is now known everywhere in the country.

HOSTIN: If her attorneys are doing the right thing and doing their jobs, they are going to have to explain to her that there is real hatred out there for her, that there have been death threats, that she cannot just walk amongst the population. That is not going to happen.

TUCHMAN: Jose Baez visited her in jail on Thursday afternoon. He is not saying anything about Casey Anthony's plans. But another defense attorney, Cheney Mason, has issued some speculation.

CHENEY MASON, CASEY ANTHONY'S ATTORNEY: She's only 25 years old. A decade from now, hopefully, she will have some stability in her life and maybe a husband, and they can be somewhere in Montana and start over.

TUCHMAN: Casey Anthony's journey to Montana or elsewhere is only a couple of days away.

(END VIDEOTAPE)

COOPER: So Gary, do authorities expect demonstrators at the jail when she's released?

TUCHMAN: Well, all's quiet at the jail right now, Anderson. But they don't know what's going to happen tomorrow night and Sunday. They're prepared for the eventuality or the possibility of a lot of people turning out.

COOPER: And she -- and she does have fans. I understand you learned fans have actually been sending her money in jail.

TUCHMAN: That's right. I mean, her parents have not sent her any money in the last three years. But we've seen records that have shown at least 15 different people have sent at least $470 to her account here at the jail which she's used for food, for cosmetics, for other purchases. And you wonder why.

Well, we talked to one of the women who has sent money to Casey Anthony. Her name is Christi Davis and she lives in the St. Petersburg area. And she's in her 50s. She's on disability. She doesn't have much money. But she tells us she sent $40 to Casey Anthony because she believes Casey Anthony is innocent. She's scared for Casey Anthony.

And she says even before the trial started, she knew that Caylee drowned. That's what she tells us.

COOPER: All right, Gary, appreciate it. Thanks. A stampede caught on tape as hundreds scramble to get a place in line. We'll tell you what the line was for, what all the fuss was about, and what happened to some of those runners in this very hectic race.

Plus, the little boy shown in this surveillance video was walking home from his day camp alone for the first time. He never made it. Details that are coming out now about how he was murdered are truly horrific. We'll tell you who's been arrested ahead.

(COMMERCIAL BREAK)

COOPER: In "Crime & Punishment", a close-knit religious community here in New York is reeling tonight. The whole country is reeling from a killing that can only be described as depraved -- depraved and profoundly, profoundly disturbing. We want to warn you upfront some of the details are gruesome. We'll try to spare you a lot of the details.

But the victim is a little boy named Leiby Kletzky. He was just 8 years old. On Monday he got lost while walking home from his day camp. It was the first time that his mom had allowed him to walk home alone. They reportedly practiced to make sure that little Leiby knew the route, but he apparently missed a turn and got lost.

You can see him in the surveillance video carrying his backpack and bag. Imagine how scared he must have been realizing he was lost. So he asked for help.

Police say the adult he turned to was this man, Levi Aron, who police say confessed to killing Leiby. He was charged today with first degree murder and kidnapping. His lawyer said he hears voices and hallucinates. That's what his lawyer says.

Police found Leiby's remains yesterday in Aron's freezer and in a dumpster. In his alleged confession obtained by WNBC, Aron said he panicked when he saw flyers with Leiby's picture when so many people were searching for him. Neighbors had been helping authorities look for the boy since Monday.

The confession continues, and I quote, "That is when approximately I went for a towel to smother him in the side room. He fought back a little bit until eventually he stopped breathing. Afterwards I panicked, because I didn't know what to do with the body."

Aron goes on to describe what he did with Leiby's body. But frankly, it's too gruesome for us to repeat tonight. The confession ends with these words: quote, "I understand this may be wrong, and I'm sorry for the hurt that I have caused." May be wrong.

It's hard to imagine what Leiby's family is going through right now. New York assemblyman Dov Hikind represents their community. He joins me now.

You've spoken to members of the family. I mean, it's a dumb question. Obviously, you can't describe how they're doing.

DOV HIKIND, NEW YORK ASSEMBLYMAN: Yes. You know, the family, the grandparents, stunned beyond belief in the kind of pain that I don't wish on anybody. I mean to lose your 8-year-old -- millions of children go to camp every single morning, day camp. And they come home and they're fine. This 7-, 8-year-old, he went to camp and never returned.

There is such shock, disbelief. If you walk through the community people are numb. People just cannot believe what happened and the reaction not just in Brooklyn, New York but all over the country.

COOPER: Without a doubt.

HIKIND: It's not a Brooklyn story.

COOPER: Right.

HIKIND: It's about every child in every place. And it's about protecting your children, because this child walked the streets of one of the safest communities anywhere. A crime rate doesn't exist.

COOPER: And it's in a tightly-knit religious community. And when I first heard this I thought, well, maybe this is from somebody outside the community. But to know that, you know, this is somebody who was known in the community.

HIKIND: Yes. I mean that was the additional shock, you know, God forbid something like this happens, who did it. And you sort of have all kind of expectations. It must have been somebody from there, from there. And no, it ends up being somebody who actually prays at a local synagogue.

You know, for two days thousands of people came into the community from all over, Jew and non-Jew -- it was an amazing, amazing thing to watch -- hoping against hope to find this child day and night volunteers worked. The police department used every resource available to find this 8-year-old. And that was a remarkable story. But it ended so horribly, so terribly.

COOPER: And the parents of this child, thankfully they don't watch television, so they haven't been told any details. They don't know --

HIKIND: Well, the grandparents actually told me today the mother does not know any of the details. When I saw her prior to the child being found dead, she was a mess. She was out of control. This was prior. Afterwards, I can't even imagine what a parent, what a grandparent goes through.

COOPER: And they did everything right in terms -- I mean, they had -- she had walked the route with him multiple times. They had discussed whether or not he should walk home alone. This was a big step in his life. HIKIND: Absolutely. He wanted this little bit of freedom. He was only, you know, 8, almost 9. He wanted to be able to walk a little bit. And what parent does not want to give their child a little bit of freedom? And this is a safe community. This was 5 p.m. People were outside.

COOPER: And it's so random that he just happened to stumble upon this man -- and at least we think it's random at this point -- and asked the man for help.

HIKIND: There are still a lot of questions.

COOPER: Right.

HIKIND: There are still a lot of questions. But the bottom line is that this 35-year-old man took this child, this 8-year-old, and you know, while the police have not identified whether it was meant for sexual abuse --

COOPER: Right.

HIKIND: -- the question is, 35-year-old man, 8-year-old child? What was he going to do with him?

COOPER: And people in the community now are coming forward and saying, "Well, you know, I had suspicions about this man. And he tried to get my little boy in a car once. Or he gave a lift to my child."

And when you hear that, I mean, it's just a reminder to all of us that, you know what? If you suspect something, say something to somebody.

HIKIND: You know, in our community, an amazing community, wonderful community, people have not yet gotten to the point of understanding there's nothing to be ashamed of when you have people in the community who are abusers, sexual abusers of children, pedophiles. People need to do -- they need to act. And maybe this will be the wake-up call for people.

And also the message for everybody in terms of your own children -- how do you protect your children? What happened here can happen anywhere in America anywhere in the world. You don't want to be overly protective. You don't want to scare your children. But you need to do more to protect your children.

That's the message here. That's the lesson here. You need to act.

When people look like you, children trust people that look like their father. In our case if you're Hassidic with a beard and so on. That's not the case. Just because someone looks like, hey, that person looks OK --

COOPER: Right.

HIKIND: -- that doesn't mean they are OK by any means.

COOPER: Yes. Well, I'm glad the family is a strong family and has a lot of community support. And please give them our best in this difficult time.

HIKIND: Thank you, Anderson.

COOPER: Thank you, Dov Hikind.

Earlier I talked about Leiby's killing with Dr. Drew Pinsky, host of HLN's "Dr. Drew" and Sunny Hostin, a legal contributor for "In Session" on TruTV and a former federal prosecutor.

(BEGIN VIDEOTAPE)

COOPER: Dr. Drew, you read this guy's -- the alleged confession from this guy, which we got, you know, through WNBC. And the last line of it really struck me. I mean, he's described smothering this child to death, basically, you know, cutting the child up, moving around the pieces of the child, trying to dispose of the pieces of the child.

The last line he says, "I understand this may be wrong, and I'm sorry for the hurt I have caused." He understands that it may be wrong? I mean what do you make of this?

DR. DREW PINSKY, HOST, HLN'S "DR. DREW": Well, I make that this is somebody who doesn't see right and wrong very effectively. The fact that he could only say that this might be wrong as opposed to understanding the depraved quality that he has -- in which he has behaved.

It's chilling to hear somebody say that. It makes me think that he might be one of these people that truly doesn't understand right and wrong; severe sociopathy really to the level of psychopathy. And if that's the case, further evidence will come out about this guy's behavior. It may be carefully hidden but we will find evidence of this kind of nonsense.

COOPER: Yes, and I mean, from this alleged confession. "When I got home he was still there," talking about the child there, "so I made him a tuna sandwich. I was still in a panic and afraid to bring him home. That is when approximately I went for a towel to smother him in the side room. He fought back a little until eventually he stopped breathing."

I mean, Sunny, do you see any red flags here at this point?

SUNNY HOSTIN, CONTRIBUTOR, TRUTV'S "IN SESSION": I mean, obviously, there's a mental health issue. And when he was arraigned on first degree murder and kidnapping, that came up. And so there's going to be that mental evaluation.

COOPER: And we heard from people in the neighborhood, we're hearing now from people in the neighborhood who said they had suspicions about this guy long before this. They didn't want their kids around him. He would give ride to kids in his beat-up car. He would be outside playgrounds. Again --

HOSTIN: And those are the red flags.

COOPER: Right.

HOSTIN: Those are the red flags. If you have adults that want to be around children, adults that don't have children of their own, or even adults that have children of their own that play all the time with children, want to give children rides -- that is certainly a red flag. That fits within the pedophile and the sociopathic profile that prosecutors look for.

But in this case, it seems to have come out of nowhere. He has no record. He was sort of a loner apparently, shy. A bit odd is how he's also described. And so I think one of the lessons out of this terrible tragedy is that people like this are just around us.

COOPER: Yes.

HOSTIN: And I think it lulled everyone into this false sense of security --

PINSKY: Yes.

HOSTIN: -- because he looked like everyone else.

PINSKY: Right.

COOPER: Well, especially in a tightly-knit religious community. But Drew, you think more will come out about patterns of this guy?

PINSKY: I do, I do. But I agree with what Sunny is saying. I would add to that, please, everybody, trust your instincts. You don't owe anybody anything, other than your children and to protect your children. So if you feel uncomfortable around somebody, you owe them nothing. Get away from them. Keep your kids away from that. That's that.

These parents had good instincts. They need to listen to them. And that's why more kids haven't been harmed in this particular case.

I do believe, again, the quality with which he is describing this act as being "maybe wrong" or "I think it was wrong" or "people might see it as wrong", suggests how disconnected he is from the experience and from what he's done. And somebody who's that far gone, that far up the sociopathic scale, probably has done other things.

(CROSSTALK)

COOPER: Right. This guy is 35 years old. So it's not -- and there's -- there's got to be more out there. It's not like this suddenly emerged at this age.

HOSTIN: I think that's right. And I think what's also interesting to note is that he was married. He lived in Memphis, Tennessee. And his wife, ex-wife, claims that she was sort of blind- sided by this.

And the other discussion I think that has come out of this is many parents are thinking, "Can I let my 8-year-old boy walk by himself, you know, from camp?" And I have an 8-year-old son. And it is a question that I think parents ask themselves all the time. When can you give your child that leeway? When can you give them that freedom?

But in today's society, unfortunately -- I'm not trying to blame the parents here -- in today's world, I don't think it's something that you can do.

COOPER: It's just stunning.

PINSKY: You can't be vigilant enough. You cannot be vigilant enough.

COOPER: Yes.

HOSTIN: Yes.

COOPER: Dr. Drew, thank you. Sunny Hostin, thanks.

HOSTIN: Thanks.

(END VIDEOTAPE)

COOPER: So sad those videos of the little boy just walking down the street.

Still ahead, late developments in the legal fight over the military's "Don't Ask, Don't Tell" policy, and tonight's "RidicuList".

(COMMERCIAL BREAK)

COOPER: Coming up, the creator of the hit TV show "Glee" is added to our "RidicuList" tonight. We'll explain in a moment. But first, Isha Sesay joins us with a "360 News & Business Bulletin" -- Isha.

ISHA SESAY, CNN CORRESPONDENT: Anderson, the Justice Department is after California federal appeals court to reconsider its order last week, temporarily blocking the U.S. military from enforcing its ban on gays and lesbians serving in the military. The Obama administration is moving ahead with plans to appeal its "Don't Ask, Don't Tell" policy but objects to the court forcing them to officially end it right now.

At issue is whether the policy can remain in effect, even in name only, while the legal fight over its constitutionality continues in the federal courts.

In Dallas, Texas, a stampede caught on tape as hundreds of people got on line for a limited number of Section 8 housing vouchers. At least eight people were hurt this morning.

And the annual list of American cities with the most millionaires is out, with Anderson, New York getting the top spot, followed by L.A. and Chicago. Now interestingly enough, in each of those cities, the number of millionaires rose by at least 7 percent, even with high unemployment and a declining housing market.

COOPER: Hmm.

SESAY: Something for you to think about, before you fall asleep.

COOPER: It is something. Actually, I'm rewriting something on "The RidicuList". I'm sorry. I was distracted.

SESAY: Oh, so you weren't even paying attention to me?

COOPER: No, I was. I was sort of nodding, like --

SESAY: Ok, fine. Fine, fine, fine.

COOPER: This is like that presenter on the BBC we aired last night, who was, like, "Who did I go to that movie with? Oh, it was you."

SESAY: But I'm going to be here with you, you know, every night, so just remember that.

COOPER: It was just a one-line thing. I was just --

SESAY: OK.

COOPER: I'm sorry.

SESAY: Good bye.

COOPER: Up next, tonight's "Perry's Principles": high school students who are entrepreneurs; starting their own businesses, becoming their own bosses.

(COMMERCIAL BREAK)

COOPER: More than 10 million Americans are self-employed. They own their own businesses. They're their own bosses. What you may not realize is some of them are still high school students. Here's education contributor and high school principal, Steve Perry with tonight's "Perry's Principles".

(BEGIN VIDEOTAPE)

STEVE PERRY, CNN EDUCATION CONTRIBUTOR (voice-over): Nia Froome is not your typical 18-year-old. She's met the President, rang the opening bell at the New York Stock Exchange and started her own business, Mama Nia's Vegan Bakery. Her cookies were even served at an event at the famed Waldorf Astoria Hotel in New York.

PERRY (voice-over): NFTE stands for Network for Teaching Entrepreneurship. It's a non-profit, inspiring low income students to stay in school by tapping into their interests to create businesses. Using a hands-on approach NFTE teaches how reading, writing and math skills from the classroom translate into the real world. At NFTE's national competition last fall, Froome's bakery won the $10,000 grand prize.

(on camera): When you go off Yale in a couple of months, you have the opportunity to continue this business that you began here in New York. Will you?

FROOME: I plan to. This summer is going to be very intense for me since I'm going to be trying to get it to a point where people can bake and it can be run without me actually coming back every weekend to bake.

PERRY (voice-over): Businessman turned teacher Steve Mariotti founded NFTE in 1987. He was inspired after he was mugged by some kids in New York City.

STEVE MARIOTTI, FOUNDER, NFTE: There's no kid under 18 or whatever that's a bad person. You get into a peer group, you start thinking that the way to get resources is to use physical violence or threaten people. So if you can start teaching young people, those in poverty about basic income statements, record keeping, how to do a sales call, how to save your money, how to invest it, you'll lower the business failure rates. And I think that will have a dramatic impact on ending poverty.

BARBARA CAMPBELL, NFTE ALUMNA: This is my logo. And this is my name of the company.

PERRY: Barbara Campbell is long-term proof of NFTE's success. She grew up in a rough New York neighborhood and started designing handbags at 16.

(on camera): When you say rough, what was going on?

CAMPBELL: A lot of people were dropping out of high school. There was a lot of teen pregnancy. But I figured I didn't want to -- I wanted to graduate. And I wanted to do good for myself. So being part of the NFTE program that really introduced me to entrepreneurship. And that it was possible that I can work for myself.

PERRY (voice-over): Today her business includes belts, jewelry and purses but the slow economy has been tough on her. CAMPBELL: It affected the stores that I was in. It affected my vendors. But once again, being part of this great program, NFTE, teaching me how to write a business plan, I was able to go back and really strategize a new approach.

(END VIDEOTAPE)

COOPER: Why do you think the NFTE program is working?

PERRY: Many children say they want to be entrepreneurs. What NFTE does is it puts these kids in a position to open a business now.

We met a young lady who's going to Yale because she took an issue that was important to her which was her mom's cancer survival and turned that into vegan cookies -- I know, vegan cookies. This is a 18-year-old kid who took an idea and turned it into a way to make a change.